What's In Your Tool Box?

Education is hanging around until you've caught on.

Robert Frost

 

Over the past couple of months I've been analyzing sector rotation on a weekend basis. Prior to this I've tried to develop some tools to make better use of sectors and their rotation with limited success. Yet every day I keep plugging in sector information because I know it is important and significant and I also know why it is considered to be important and significant; however that doesn't mean I know how to make use of it for myself.

I kept scratching the surface and figured as long as I continued doing so eventually I'd get to the primer and perhaps deeper still. With time I did begin to peel back some layers and realized there were some severe short comings and limitations to how I was addressing this information. Information is abundant but without a plan to filter and manage -often useless. More information is not necessarily going to lead to better decisions, neither is better information without a process of applying it going to lead to improved decisions.

Once I started digging a little deeper I began to see the limitations of my applying this information and the delusion of knowledge evaporated. I had no realization that many of the Morningstar Industry Groups have 2 or 3 stock attributes so their significance of being in the top 20 becomes negligible, perhaps even lacking relevance at all. Some also have such limited volume that their significance is skewed as well. In acknowledging their limitations, their usefulness became better understood as well and a personalized process of application opened up, too.

Fin Viz uses the same data stream as TeleChart when it comes to its sectors, so it is an easy transition understanding the inherent limitations of this information. One benefit that Fin Viz has is its efficiency in moving back and forth between the sectors and the stocks that they comprise, as well as quick visual glances at the underlying chart formations. There is another tool that can be used with these sectors and that is running them through the stock screen. These two combine into a powerful tool of sector and stock scanning, as well as an idea generator. 

The first step is sorting the Industries by one month performance using Fin Viz

From this list I look at the top 20.

Top 20 from Fin Viz

Now that I have a list of the top 20 the next process is to use the Fin Viz Screener tool. My set up is fairly simple:

• small cap stocks
• up over the past half year
• over $3
• 100K average volume
• 10% or less below 52 wk high

 

Then I go through each of the Industries that are listed and check out which stocks meet the requirements. From this list I can now focus on those with charts that are consolidating in anticipation of the next swing up.

Having gone through this scan over the weekend, the main Industry that clearly stands out meeting the screen is the Apparel Industry. 

Apparel Industry

 

As this is the time to begin keeping robust watch lists and looking for the next leaders, this may be one group to keep in mind down the road. There are a number of ways to configure this to one's taste and rapidly generate trade ideas in keeping with one's methodology.